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3 Ways to Reduce Employment Costs with Human Resources Outsourcing

Guest post by: Ari Rosenstein

Article Overview: The Human Resources Outsourcing industry remains strong through the weak economic recovery. Recent studies indicate that organizations, both large and small, either already have an HRO relationship and plan to expand it, or are considering one in the coming year. Businesses can reduce costs with HR Outsoucing by streamlining HR systems, purchasing discounted insurance products and reducing employment risks.

3 Ways to Reduce Employment Costs with Human Resources Outsourcing

The Human Resources Outsourcing industry remains strong through the weak economic recovery. Recent studies indicate that organizations, both large and small, either already have an HRO relationship and plan to expand it, or are considering one in the coming year. The survey, conducted by HfS Research and the London School of Economics, finds that 31% of business already outsource human resources and are looking to increase outsourced services over the next year. An additional 15% do not currently outsource, but are looking to begin outsourcing various HR functions in the coming twelve months.

What is the driver for these businesses to outsource human resources?

It is no secret that in lean economic times, business owners are pressed to identify expenses within an organization that can be reduced or minimized. Employment overhead (payroll, taxes, workers' compensation insurance, employee benefits, governmental compliance, and other employee-related cost centers) typically comprise the single highest area of expense within a company. More than rent, or facilities operations, or equipment, or compliance, human resources administration and expenses weigh heaviest on the business's bottom line.

By engaging a human resources outsourcing firm, the business owner is able to reduce employment costs in three primary ways.

Streamlined HR Systems

HRO firms offer streamlined human resource systems to their clients, significantly minimizing management's time in overseeing daily administrative tasks. Non-productive "paper pushing" can be outsourced to the HR firm, enabling key staff to focus on their core competencies. Processes such as payroll processing, tax filing and compliance, Unemployment Claims administration, workers' compensation management, and employee benefits enrollment and management can all easily and efficiently be outsourced. The HRO firm rolls the client's administrative processes into their existing systems, offering seamless management at a fraction of the cost.

Cost effective insurance products.

Small businesses are at a significant disadvantage when it comes to purchasing insurance products for their employees. Both workers' compensation insurance and employee benefits have become a significant financial burden on employers. While a small employer is limited in the range of benefit plans and insurance offerings they can provide, HR Outsourcing firms forge relationships with large regional and national insurers. Through these relationships, and the resulting economies-of-scale, HROs offer their clients richer, more cost-effective insurance plans.

Reducing employment risks

Government compliance and regulations continue to grow in complexity and scale. Month after month, new case law is created and many of these decisions directly impact employers on the ground. From wage and hour issues, to discrimination restrictions, to protected classes of employees and new disability guidelines, employers often walk through a minefield of risk. Without dedicated human resources personnel or legal counsel, it is likely a business will be faced with some form of an employment lawsuit in the coming years which can costs tens-of-thousands of dollars. With close to 100,000 employment claims filed in 2010 (the highest on record!), employers recognize the risk and are turning to Human Resource Outsourcing firms to assist them in managing these risks. HR firms employ teams of experts in a wide range of disciplines and are able to provide accurate and timely advice to assist their clients avoid expensive employment lawsuits.

Human Resources Outsourcing may not be the solution for every employment need. However, for most employers with less than 200 employees looking to reduce employment expenses and overhead, outsourcing human resources may be exactly what their organization needs.

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Article Tags: HR outsourcing, HRO, human resources outsourcing, outsource HR



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